LNG prices should recover from their current coronavirus-related lows by end-year. But given the significant oversupply in the market, prices are likely to remain historically weak . We had always expected average LNG prices to fall this year owing to …
13th February 2020
Measures to contain the spread of coronavirus in China have already dealt a heavy blow to metals demand. But the longer China’s economy remains part-suspended, the greater the chance that supply is also curtailed substantially. The scale of any supply …
Factory shutdowns in China are starting to have significant knock-on effects on the rest of the region as companies struggle to source intermediate goods. The garment and electronics sectors are likely to experience the worst of the disruption, while …
Lebanon’s new government appears to be warming to the idea of going to the IMF, which would reduce the risk of a disorderly debt default that causes severe strains in the local banking sector. But even if the authorities go to the Fund, any deal is still …
Indicators suggest that Irish industrial rental growth will remain healthy in Q1. However, as economic growth slows and uncertainty about the UK’s future relationship with the EU continues to impact decision making, we expect that industrial rental value …
December’s misleadingly strong mining figures shouldn’t distract from evidence that GDP probably contracted in Q4, tipping the country into a recession and creating a very weak starting point for 2020. Figures released today showed that mining output …
A jump in reported cases and deaths appears to reflect the official figures getting a better grip on the true extent of past infections, rather than indicate a recent acceleration in the spread of the virus. If anything, the latest data continue to hint …
The New Zealand government’s $12 billion infrastructure package should contribute to a pick-up in business investment and GDP growth from the second half of this year. That supports our view that interest rates have now reached a trough in New Zealand. We …
The coronavirus is contained in the US, and with Chinese construction imports and non-resident buyers too small to have a meaningful impact, the housing market has so far escaped the virus largely unscathed. But if a widespread outbreak occurred, a …
12th February 2020
Given the rising economic toll from the coronavirus, worries about rising property prices and high levels of household debt are unlikely to stop the Bank of Korea (BoK) from cutting interest rates at the end of the month. With the economic costs of the …
This morning’s decision by the Riksbank to leave its repo rate on hold at zero percent was never in doubt. While policymakers appear happy to stay in wait-and-see mode for the time being, we suspect that they will come under pressure to loosen policy …
Cash is still widely used in Japan and amid concerns about the impact on financial stability, a central bank digital currency for retail transactions is unlikely to be introduced anytime soon. There’s a case for an e-yen in wholesale funding markets but …
The Reserve Bank of New Zealand sounded confident when it left rates on hold today and we think the improvement in underlying economic conditions means the RBNZ’s easing cycle is now over. The Bank’s decision to keep rates on hold was correctly …
Latin American dollar bonds have performed relatively well since fears related to the coronavirus started to weigh on the region’s financial markets. But if commodity prices and currencies in the region remain weak, dollar bond spreads are likely to widen …
11th February 2020
The economic disruption from the coronavirus outbreak will lead to further rate cuts in much of Emerging Asia. And in those countries where currencies have fallen sharply, the moves have not been big enough to worry policymakers. As thing stand then, this …
Chinese imports of gold surged in December, while India’s foreign purchases remained in the doldrums. Looking ahead, we expect high local-currency prices in India coupled with a slowdown in Chinese economic growth to curb physical demand for gold in 2020. …
The economic disruption caused by the coronavirus means that we now expect the oil market to be in a surplus in Q1 2020, as opposed to the deficit that we had previously envisioned. However, providing that the virus is contained, we think that demand will …
Rapid employment growth in the technology and information industries has been behind a surge in demand for office space in San Francisco. Even if this growth were to slow somewhat, we expect absorption to exceed new supply over the next three years, …
Efforts to contain the virus are becoming less draconian but with many factories struggling to re-open and households not spending, it will be a while before the drag on growth fades. Reuters reported today that President Xi warned officials last week not …
Severe weather contributed to January’s jump in the average hourly wage by limiting the hours that salaried employees were able to work. As their hours return to normal, annual wage growth is likely to drop from January’s 4.2% to 3.4% in February and we …
While Chinese equities and bond yields might return to their levels of early-January if the coronavirus epidemic is contained, our bearish view of China’s economy suggests to us that they and the renminbi will go back down before the end of the year. It …
The Turkish authorities have kept a tight grip on the lira in recent weeks but we don’t think that this can continue for much longer and expect the currency to fall by 20% against the dollar by end-2020. The longer that policymakers intervene to prop up …
10th February 2020
Ireland’s general election result does not change our view on the near-term outlook for the economy, which should maintain a decent pace this year and next. But it does raise questions about the longer-term risks to public finances, particularly if Irish …
The RBA may yet cut rates to 0.25% in response to the drag on economic activity from the bushfires and the coronavirus. But with domestic demand rebounding as the housing slump has turned to boom, the urgency to support the economy has diminished. The RBA …
For now, our best guess is that the economic disruption related to the coronavirus will cost the world economy over $280bn in the first quarter of this year. If we’re right, then this will mean that global GDP will not grow in q/q terms for the first time …
7th February 2020
The Russian central bank governor’s post-meeting press conference reinforced the message that, following today’s 25bp interest rate cut to 6.00%, further easing lies in store. We maintain our view that there will be another 50bp of rate cuts in the …
Bernie Sanders is still a long way from the White House, but several of his policies look very negative for US equities. If his support continues to climb that could start to weigh on the US stock market. It remains up for debate whether Bernie Sanders or …
After a severe drought in 2019, Kenya is now facing the worst desert locust outbreak in 70 years. The impact on livelihoods could be devastating, but the economy-wide cost is likely to be limited. Locust outbreaks can inflict significant economic damage …
Headline consumer price inflation is likely to have edged up in January, in large part due to a continued increase in food inflation. Further ahead, food inflation is likely to ease, but we expect core inflation to rise over the coming quarters as the …
Provided that the coronavirus is brought under control reasonably soon, the consequences for the euro-zone economy should be quite small. Nonetheless, with growth likely to be very sluggish in any case, it could be enough to cause the euro-zone economy to …
6th February 2020
The Brazilian government’s plans to enshrine full central bank independence in law would help to both keep longer-term inflation expectations low and bring down real interest rates. This adds to the reasons to think that local currency bond yields will …
We wouldn’t be surprised if the recent recovery of EM equities continued over the coming weeks, with the stock markets of those countries that fell furthest following the outbreak of the coronavirus making up lost ground. Nonetheless, we wouldn’t expect …
The statement and press conference following today’s Czech MPC meeting confirmed that the surprise decision to hike interest rates by 25bp, to 2.25%, will be a one-off. Policymakers will probably maintain a hawkish tone over the next few months but, as …
Over the next two years we expect US property to produce total returns of over 7.5% p.a. This would be stronger than any of the last three years and, more importantly, would be a better outturn than we expect for US equities and far stronger than the …
While several central banks are undertaking reviews of their monetary policy frameworks this year, the result is likely to be only small tweaks to the existing inflation-targeting frameworks. But this doesn’t rule out a potential widening of central …
With flights to and from China halted and the handful of domestic cases isolated, the risk of a coronavirus epidemic developing in the US – and the potentially devastating economic disruption that would entail – is seemingly low. However, reduced tourism, …
The ultimate impact of the coronavirus outbreak in China on the Australian economy will depend on how quickly the virus is brought under control. But given the disruption that has already happened to tourism and to Chinese demand for Australian goods …
The latest data revealed that commercial property investment in the euro-zone held steady at a record high level. And with favourable relative pricing and capital readily available, we think that investment will reach a similar level this year. Following …
The Philippines (BSP) cut its main policy rate by 25bp to 3.75% today and with growth likely to disappoint and inflation set to remain well within the BSP’s target, we expect more easing later this year. Today’s decision to cut was correctly predicted by …
The statement accompanying the Brazilian central bank’s meeting last night gave a clear steer that the easing cycle is now over. With growth likely to stay weak and inflation low, we expect that the Selic rate will be left unchanged for much longer than …
The step-up in interventions by Denmark’s Nationalbank (DNB) to strengthen the krone in January puts to bed the idea that the Bank is comfortable with allowing the krone to trade in a more symmetric band. But while the chances of a unilateral rate hike by …
While keeping rates on hold today, the RBI has kept the door open for further policy loosening over the coming months. But we doubt this will materialise, and expect the central bank to shift to tightening mode before the end of the year . All six member …
Policymakers have loosened both monetary and fiscal policy in an effort to soften the economic blow from the coronavirus. Further easing is likely in the coming weeks. But if the virus peaks soon then activity may rebound quickly, with stimulus now coming …
Emerging Asia is most vulnerable to the coronavirus-related disturbance to manufacturing supply chains. Industry-level data suggest that temporary disruption should have little macroeconomic impact in DMs. But the effects are highly uncertain, and at very …
5th February 2020
The Great Moderation in the volatility of GDP growth and price inflation, which began in the 1980s, came to an abrupt end with the onset of the financial crisis in 2008 but, a decade later, what stands out again is just how stable economic growth and …
The surge in Bernie Sanders’ perceived chances of the winning the Democratic nomination could yet weigh on the stock market if he continues to build momentum in upcoming primaries. Even so, our initial sense is that a Sanders presidency wouldn’t be as big …
The government’s hopes of hitting the record asset sales target in the budget for FY20/21 hinge on the smooth sale of large stakes in one of India’s worst-performing banks and a politically-important insurer. Neither is likely. The government may choose …
It’s possible that consumer spending stagnated or even fell outright in Q4. But this is not too worrying as stronger growth in incomes, a fall in uncertainty and a rise in confidence should lead to a rebound in consumer spending this year. Consumer …
This morning’s decision by the Central Bank of Iceland (CBI) to resume its easing cycle came as no surprise to us following the recent fall in inflation. Given the potential for the coronavirus to exacerbate the deep downturn in the tourism sector, the …
Morocco’s economy has slowed over the past few years, but we think that a recovery will take hold in 2020. Further out, we expect that the country will record growth in excess of 5% a year by 2030. After peaking at 4.0% in 2017, GDP growth in Morocco has …
